The legal decision could have ramifications to the tune of tens of billions of dollars.
A unanimous opinion by the Washington, D.C. Circuit Court of Appeals has reversed a lower court ruling, thereby restoring a Centers for Medicare & Medicaid Services (CMS) rule requiring private healthcare insurers that administer Medicare Advantage (MA) plans to return overpayments they receive in spite of incorrect diagnoses.
The ruling issued Friday is a considerable financial blow not only to UnitedHealthcare, the appellees in the matter, but other private insurers as well – such overpayments soared to $16.2 billion in 2016, constituting nearly 10 percent of all MA payouts, according to Reuters.
“The Overpayment Rule is part of the government’s ongoing effort to trim unnecessary costs from the Medicare Advantage program. Neither Congress nor CMS has ever treated an unsupported diagnosis for a beneficiary as valid grounds for payment to a Medicare Advantage insurer,” U.S. Circuit Judge Cornelia T.L. Pillard wrote in the 49-page opinion. “Consistent with that approach, the Overpayment Rule requires that, if an insurer learns a diagnosis it submitted to CMS for payment lacks support in the beneficiary’s medical record, the insurer must refund that payment within sixty days. The Rule couldn’t be simpler.”
Pillard explained that payments to insurers involved with MA depend on those insurers “accurately reporting to CMS their beneficiaries’ salient demographic information and medically documented diagnosis codes.” To better control erroneous payments, she wrote, including those garnered from reported but unsupported diagnoses, Congress in 2010 amended the Medicare program’s data-integrity provisions – implementing a 60-day deadline for reporting and returning identified overpayments, and confirming that such payments not promptly returned may trigger liability under the False Claims Act.
“UnitedHealth claims that it is unambiguous in the text of the Medicare statute that the Overpayment Rule is subject to a principle of ‘actuarial equivalence,’ and that the Rule fails to comply. But actuarial equivalence does not apply to the Overpayment Rule, or the statutory overpayment-refund obligation under which it was promulgated,” Pillard wrote. “Reference to actuarial equivalence appears in a different statutory subchapter from the requirement to refund overpayments, and neither provision cross-references the other. Further, the actuarial-equivalence requirement and the overpayment-refund obligation serve different ends. The role of the actuarial-equivalence provision is to require CMS to model a demographically and medically analogous beneficiary population in traditional Medicare to determine the prospective lump-sum payments to Medicare Advantage insurers. The Overpayment Rule, in contrast, applies after the fact to require Medicare Advantage insurers to refund any payment increment they obtained based on a diagnosis they know lacks support in their beneficiaries’ medical records.”
Reuters reported that as of Friday afternoon, neither UnitedHealthcare nor the U.S. Department of Health and Human Services (HHS), which has oversight authority over CMS, had commented on the decision. UnitedHealth had filed its original suit in 2016, and in 2018, U.S. District Judge Rosemary Collyer in Washington ruled in its favor, overturning the Overpayment Rule.
Pillard summarized UnitedHealth’s claim in witheringly critical fashion.
“UnitedHealth contends that the actuarial-equivalence principle reaches beyond its statutory home to impose an implied – and functionally prohibitive – legal precondition on the requirement to return known overpayments. As UnitedHealth would have it, Congress clearly intended enforcement of the statutory overpayment-refund obligation, which the Overpayment Rule essentially parrots, to depend on a prior determination of actuarial equivalence,” she wrote. “That principle, UnitedHealth says, prevents CMS from recovering overpayments under the Rule unless CMS first shows that the rate of payment errors to healthcare providers in traditional, fee-for-service Medicare is lower than the rate of payment errors to the Medicare Advantage insurer, or that CMS comprehensively audited the data from traditional Medicare before using it in the complex regression model – the CMS Hierarchical Condition Category (CMS-HCC) risk-adjustment model – that predicts the cost to insure Medicare Advantage beneficiaries.”
“There is no legal or factual basis for UnitedHealth’s claim,” Pillard continued. “Actuarial equivalence is a directive to CMS. It describes the goal of the risk-adjustment model Congress directed CMS to develop. It does not separately apply to the requirement that Medicare Advantage insurers avoid known error in their payment requests. It assuredly does not unambiguously demand that, before CMS can collect known overpayments from Medicare Advantage insurers, it must engage in unprecedented self-auditing to eliminate an imagined bias in the body of traditional Medicare data CMS used in its regressions. The implausibility that Congress would have so intended is underscored by the lack of parallelism between the context and effects of, on one hand, unsupported diagnoses in the traditional Medicare data CMS uses to model generally applicable risk factors and, on the other, the specific errors the Overpayment Rule targets.”
Even if actuarial equivalence applied, as UnitedHealth suggests, Pillard wrote, it would be UnitedHealth’s burden to show the “systematically skewed inaccuracies on which its theory depends, which it has not done.” Also described as “fatal to UnitedHealth’s claim,” she added, is that it never challenged the values CMS assigned to the risk factors it identified or the level of the capitation payments resulting from CMS’s risk-adjustment model.
“It cannot belatedly do so in the guise of a challenge to the Overpayment Rule,” Pillard concluded.
Opinion was published online: https://www.cadc.uscourts.gov/internet/opinions.nsf/BC04AB134EEF09A285258730004EFDC4/$file/18-5326-1910101.pdf